I have a question / scenario im looking to understand regarding cryptos and wondered if anyone here wants to comment on the below and discuss...

It goes:

Given that crypto's are 100% reliant on organisations dedicating resources toward mining transactions on the blockchain for them to be viable currencies and that financial incentives for participating in the networks are based upon the amount of transactions successfully mined, then it logically follows that the more resources an organsiation can dedicate to mining transactions then the higher the profits they can earn. But whilst anyone can mine transactions, it rarely happens that individuals do, because the economies of scale have kicked in and the vast majority of mining transactions are processed thru these huge crypto data centres owned by unknown orgsanisations who can leverage large sums of $$$ to purchase rackspace, hardware, power, tech administrators and bandwidth.

[We've already seen the impact of economies of scale kicking in on the price of DRAM and 3D Video cards, which are double what they should be due to their ability to do better floating point math than CPU's.]

Without the transaction mining activity any cryptocurrency is dead. Therefore as a holder of crypto you are 100% reliant on these large crypto mining operations for the ongoing usability of the coins you hold. If they stop mining, the transactions times will take longer, utility of the currency will be affected and people will stop using the coins leading to the death of the network.

So exploring this idea that the miners are important for the success of the network and coin holders are reliant upon them, lets imagine for a moment that an organisation (or a consortium) has proprietary access to hardware "Super X" that can perform crypto mining TEN TIMES faster & cheaper than any other organisation is currently capable of. That consortium would be at an advantage and is going to make larger profits because it's able to process more transactions than the competitors and gain a larger share of the market. The competitors to the consortium will see their profits dwindle and likely close their operations leading to the consortium having a monopoly controlling interest of transaction processing of the currency.

If you think that's crazy, just imagine a consortium made up of Google, Intel, AMD & NVIDIA — could they pull it off?

So if a consortium gained a controlling interest in mining (and I think it could) it begs the question, would such a consortium then push for a fork in the bitcoin core code fork (release) which then further favour them or some other entity they decided upon? For example maybe they could force through changes that mean you'd have to register your account with the tax office, or local bank or I dunno, publish your id with your wallet. Who knows what.

But effectively, is such a takeover feasible? Could a consortium or state backed organisation perform this kind of change?

  • No, its a different situation. Its very unlikely that someone would amass all those resources just to manipulate the ledger, that makes no sense at all. My point is about an attack decentralised nature of the currency - via the way I mentioned above, a crypto could be coopted to become a fully proprietary currency under the control of central authority. The fact that it hasnt happened yet, doesnt mean it cant happen. – John Smith Nov 30 '20 at 12:07
  • @JohnSmith it is not a different situation, a majority attacker cannot arbitrarily change the network’ rules. See for example, segwit2x – chytrik Nov 30 '20 at 13:47
  • 1
    To change the concensus rules, the only leverage your consortium has is to take it's mining power away (e.g. to mine a fork with its preferred rules) but then everyone else just stays with the old rules and the mining difficulty automatically adjusts for the greatly reduced mining hashpower that remains, no matter how little. – RedGrittyBrick Nov 30 '20 at 21:15

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